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Is the UK still part of SEPA after Brexit?

Can UK corporates still make and receive SEPA payments after Brexit?

The payments landscape in 2021 feels ever-changing and rife with innovation.

This makes the market more competitive and drives down cost but the pace of change can also be bewildering. Add in the uncertainty of a last minute Brexit deal and we think it’s time to take stock.

So we consulted with UK Finance and our internal experts 💡 for everything you need to know about SEPA…

SEPA payments under the microscope

What is SEPA?

The Single Euro Payments Area (or SEPA) is a financial messaging initiative for the European Union, Iceland, Liechtenstein, and Norway from the European Economic Area, and Switzerland.

It is used for the simplification of bank transfers in euro, allowing a fast, secure and standardised way of making and receiving payments.

Why use SEPA?

SEPA enables businesses to make euro transfers, via direct debits and direct credits, to participating countries, using a single bank account within a standardised set of rules.

Is the UK still in SEPA?

Yes, we are still a member of SEPA.

How are we still a member of SEPA if we are no longer in the European Union?

Two years after the public voted to leave the EU, UK Finance filed an application on behalf of UK payment service providers.

It asked the European Payments Council for permission to stay involved with the SEPA scheme regardless of a Brexit deal or no deal.

This was approved in March 2019, as long as we continued to comply with the relevant criteria.

The EU flag outside Downing Street

How has Brexit affected the UK’s membership to SEPA?

According to UK Finance: “Broadly speaking, nothing has changed for UK businesses who use SEPA for SEPA payments.

“As the UK is still a member, SEPA payments made between the UK and EU should be treated the same and UK businesses will continue to be able to make SEPA credit transfers and direct debits in euros.”

However, there are a few extra details which are now necessary to make SEPA payments.

What extra information is now needed for SEPA transactions?

Brexit changes mean that the SEPA payment instruction from the corporate’s bank must include the debtor bank’s postal address.

For credits (SCT and SEPA Instant Credit Transfer) payments it needs to include the full address of the originator and the BIC code of the Beneficiary Bank.

For Direct Debit (SDD Core and and B2B) collections from the creditor, it needs to include the full address details of the debtor and the BIC code of the Debtor Bank.

According to the European Payments Council: “The lack of these additional transaction details may lead to rejected transactions or potential other issues from the scheme participant receiving the payment message.” 

How can these changes be made easily?

In our view, it would make sense for the corporate’s bank to include the postal address in the payment instruction.

What some of our customers are seeing is that some of the UK banks (are automatically enriching the payment instruction with the debtor account address.

Tom Livock, Head of Enterprise Sales, AccessPay explains: “It seems like a reasonable and pragmatic approach that the corporate’s bank deals with this issue, rather than the corporate itself.

“However, this is not mandatory and a European bank with UK domiciled euro bank accounts may not take the same view as a UK bank.

“Instead, they may suggest that the corporate opens up a new account in mainland Europe.”

Tom has advised AccessPay’s largest clients for over seven years. If SEPA payments become problematic for a corporate because of Brexit his advice is:

1) Speak to your banks and ask them to enrich data (so you don’t have to)

2) Open up an account in mainland Europe so this requirement for address information doesn’t apply

3) If you are already an AccessPay customer, and not able to move on the first two points, please contact us to see if we are able to enrich your data for you

Can we still use IBAN to make payments to the UK?

Yes, IBAN is internationally recognised and can be used to make payments to the UK.

The SEPA payment scheme

How can AccessPay help you make SEPA payments?

Group Chief Financial Officer at AccessPay Sean Moriarty said: “It is understandable for businesses to have legitimate concerns around financial transactions post-Brexit. This has been compounded by the lack of detail in the final Brexit deal around implications for the Financial Services Industry.

“Although there seems to be no drastic changes to processing payments, including SEPA, it will require additional information after the end of the transition period, such as payers’ addresses”

SEPA transactions are easier with AccessPay’s corporate-to-bank integration. Our platform allows you to process payments, direct debits and automate your statement retrieval process.

Sean added: “AccessPay uses powerful data-mapping technology to enrich the ‘outdated’ payment file formats based on validation rules, so our files are always compliant with the new rules.”

Find out more about AccessPay and SEPA here.